Buyer’s guide to health cash plans


What are health cash plans?

The origins of health cash plans can be traced back to the 19th century when they were originally provided by charitable or non-profit organisations. As a support system that pre-dates the creation of the NHS in 1948, cash plans helped employees pay for their various healthcare needs.

Despite its long history, health cash plans remain a popular and valued benefit; LaingBuisson’s Health cover UK market report, 17 edition, published in June 2022, found that 3.3 million people were covered by 2,531,000 health cash plan policies in the UK at the end of 2020. Of these, 42% were employer paid.

Health cash plans are often used by employers to specifically cover private medical insurance (PMI) excess; many cash plans incorporate cover for this as standard.

How do the schemes work?

A health cash plan allows an individual to claim back the expense of everyday healthcare costs. They primarily cover optical care, dental care, physiotherapy and chiropractic treatment. The benefits are paid whether the treatment is carried out on the NHS or privately. LaingBuisson’s report states that between two-thirds and three-quarters of claims paid relate to NHS treatments.

However, health cash plans can also be tailored to include more varied benefits, such as the provision of diagnostics with an MRI or X-ray. For example, Westfield Health’s cash plan includes access to CT and PET scans. Many health cash plan providers offer value-added services with the schemes, which include access to a 24-hour a day seven days a week GP helpline, mental health support, employee assistance programmes, and retail and leisure discounts.

Health cash plans are available as either an employee- or employer-paid benefit. It can be offered to the employee as either a voluntary benefit, whereby the employer offers access to the scheme, but the cost lies with the individual; or as a corporate-sponsored product which the employer funds on behalf of the employee.

Employers can choose which products to include or exclude for their employees’ plan. This flexibility and access to healthcare cover at a minimum cost, can help feed into a wider health and wellbeing strategy because, as well as leading to general improvements in the health of a workforce, health cash plans can contribute towards reduced sickness absence rates.

What are the costs involved?

Within the employer-paid market, the standard £1-a-week model is still predominant. The cost of health cash plans is inclusive of insurance premium tax (IPT). The market average is just over £100 per year, per employee, because not every employer opts for the base level plan. If an employer does opt for the base level, there is the facility for employees to upgrade their own cover.

Within the voluntary benefits market, contributions could fall anywhere between £5 and £10 a month. As with the corporate-paid plans, adding bolt-on options to a basic plan will also increase costs. For example, Westfield Heath’s hospital treatment bolt-on sets the plan cost at £5.55 per employee, per month.

What is the annual spend?

LaingBuisson’s Health cover UK market report found that total spending on health cash plans in the UK at the end of 2020 was £411 million. Of this, £146 million was from employer-paid plans. The total benefit paid was £219 million. The average annual price paid per employer-paid plan was £100, and for individuals was £248.

Are there any tax or legal issues?

Employer-paid health cash plans are treated as a benefit-in-kind for tax purposes and the value of the benefit is determined by the premium paid rather than the cash that is repaid to an employee.

There are no legal implications associated with a cash plan, although an employer can use one to help fulfil its duty-of-care requirements to employees’ health and wellbeing.

What are the current market trends/developments?

With the current economic climate, the pressure on the NHS, and costs of living continuing to rise, providers have seen employers’ appetites to support the wellbeing of staff through benefits increase, just as employees have come to expect more. Providers, including Health Shield and Westfield Health, have kept the prices on their core products stable for the last few years to ensure plans are affordable for both employers and employees.

Mental health support continues to be a big area of focus for employers, so the add-on services that come with a health cash plan, such as EAPs, GP helplines and telephone counselling, are proving to be ever more valuable.

Technology has improved the way employees are able to access their benefits. Many providers now offer digital platforms, rather than paper forms, to enable individuals to process their claims. Health Shield’s Breeze platform gives employees access to a counselling helpline, a mental wellbeing app, a doctor via phone or video, and prescription delivery, among other benefits. Westfield Health customers are able to use its claiming mechanism through its digital wellbeing service, MyHealth, and also access its online digital community, Togetherall, which helps support individuals with their mental health.

Who are the main providers?

LaingBuisson’s report shows that within the health cash plan market, SimplyHealth, Westfield Health and Health Shield hold the top three places of market share by income. Other providers include BHSF Group, Medicash, Sovereign Health Care, Bupa, HSF, Benenden Health, The Exeter, Paycare, and WHA.